Beyond Traditional Redlining: Creativity in Contracts

Contract redlining – the activity of marking up a contract to show proposed changes – is a go-to technique for contract negotiation and review enthusiasts, now further enabled by automation and AI. But before we get carried away by the ease with which it can be undertaken, let’s reflect on the point that how and when we wield that trusty red pen can make or break business outcomes. 

Traditional Redlining

It’s interesting to reflect on the origins of the term. ‘Redlining’ was a discriminatory practice introduced in the US financial sector to limit risk. Hence it often remains associated with risk allocation and protection of self-interest – an approach which tends to be reactive rather than creative, especially when:

• Changes are made without considering the underlying business objectives
• Edits focus solely on shifting risk to the other party
• Modifications are based on templates or standard positions without consideration of the specific relationship

Creative Contracting Approaches

More imaginative approaches to contract review and negotiation include a check to ensure we are even reviewing the right commercial model. Too often, the parties become so engrossed in the battle over redlines that they forget to ask ‘Is this the right form of agreement and the appropriate set of terms?’ A value-add process includes a quick review, asking whether before we rush into redlines, we should be:

• Focusing on mutual value creation rather than just risk allocation
• Designing innovative solutions to address both parties’ concerns
• Using visual elements, plain language, and creative formats to enhance understanding
• Developing relationship-focused provisions that encourage collaboration

Before you act …

1. Ask “why” questions to understand underlying needs before proposing changes
2. Consider multiple alternative solutions to address concerns
3. Focus on outcomes rather than specific contract language
4. Use design thinking principles to reimagine contract structures
5. Incorporate relational elements that support long-term collaboration

Conclusion

Redlining is a necessary tool in contract review. However, an approach to redlining that is purely reactive and fails to consider creative alternatives is inevitably confrontational in nature. We must be wary of stifling creativity and imagination by jumping straight to redlines. The most effective contract professionals use redlining as just one tool within a broader, more creative approach to contracting that focuses on relationship-building, mutual value creation, and innovative problem-solving.